Fed Chairman: The US economy “must suffer” to control inflation

Mr. Powell said he can’t commit to a soft landing on the economy (the cyclical tendency to slow down to avoid a recession) as the Fed raises interest rates to stave off price gains that are near record highs in the past year. over 40 years.

The Fed chair emphasized in the Marketplace interview: “A soft landing is to bring inflation back to the 2% target level while maintaining a strong job market. Getting there now is quite difficult. for some reason”.

Mr. Powell said that the labor market is tightened, thereby increasing people’s wages. Therefore, avoiding a recession after a tight monetary policy is a tough challenge.

Fed Chairman Jerome Powell warned that controlling inflation could cause some economic difficulties, but it remained his top priority. Photo: Reuters

Fed Chairman said: “The future is challenging, not easy. No one at the US central bank believes that tightening policy will be easy. However, we think we have ways to achieve it. be targeted”.

Mr. Powell’s comments came the same day the Senate voted to confirm he was entering a second term.

Topping the list of priorities for Mr. Powell’s new term is controlling price inflation. In April, the consumer price index (CPI) increased by 8.3% year-on-year, just below the more than 40-year high announced in March.

Last week, the Fed raised interest rates by 50 basis points after a 25 basis point hike in March. Markets expect the Federal Open Market Committee (FOMC) to make another 50 basis point hike in June. and continue to raise interest rates until the end of the year.

According to CNBC, Mr. Powell understands the damage to the economy when interest rates rise, but insists the US central bank needs to act aggressively.

Mr. Powell has been criticized for delaying rate hikes and halting bond purchases even as inflation has skyrocketed. Furthermore, at last week’s press conference, he implied that the FOMC is not considering a 75 basis point increase.

The head of the Fed said it was not certain how much different things would have been if the US central bank had acted more quickly but did the best it could.